Hedging of price and volumetric risks in the electricity market via price and weather financial instruments

Resumen

​Abstract

Our work concentrates in the case of an energy retailer procuring power from the wholesale market at the standing spot price and selling it at a fixed price to consumers exhibiting variable demand. The energy retailer is exposed to both price and quantity. It is natural to use financial instruments based on energy price to hedge the retailer profit. We consider also using weather instruments to construct such hedges, as weather is correlated with both price and demand. 

We propose robust methods to find optimal hedging portfolios. Our methods are robust in the sense that we do not make any assumption on the underlying distributions.

Join work with: J. Pantoja and J. Sanchez. 

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